SEC Emergency Orders: Implications for Buyside and Sellside Firms

In the face of the current extraordinary market conditions, the Securities and Exchange Commission (SEC) has announced that it is exercising regulatory powers through the following temporary orders: (1) prohibiting short selling in the common stocks of publicly traded financial services companies; (2) requiring that registered and unregistered institutional money managers report initiation of short sales of certain publicly traded common equity; (3) instituting temporary borrowing and delivery requirements on short sales of all publicly traded equity securities, (4) adopting an antifraud rule addressing “naked short selling;” and (5) easing restrictions on issuers’ repurchases of their shares. The orders were compiled quickly in the face of rapidly moving market conditions, and thus, have raised interpretive questions and some uncertainty regarding their implementation.